Monday, April 20, 2009

CBS 60 Minutes covers the 401K meltdown

CBS 60 Minutes last night offered a grim report on the decline of retirement dreams with the loss of 401K’s. The show, hosted by Steve Kroft, focused on a career fair in Manhattan.

The most endangered workers seem to be those in their 50s and 60s who often lost over half their life savings. Younger workers will have to time to recover their losses with dollar-cost averages.

One problem is that conventional financial planning didn’t do people approaching retirement any good. There was a herd mentality, and conventional “professional” advice turned out to be wrong. Even mutual funds turned out to be untrustworthy. The one thing that held value was FDIC-insured stocks, and very conservative “bread and butter” type stocks. People who made their own investment decisions on conservative grounds often did better than those with financial planners.

The report called the 401K system as the wobbly gam of a “three-legged stool” for financial security. It was created in the late 1970s as a tempting strategy to deal with tightening pensions.

The report covered the high fees of various kinds associated with many plans, which could eat up half the income of the plans even in good times.

The CBS link is here.

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The Newark Star-Ledger has an interesting op-ed by John Bury, “401K Recession – Beyond 60 Minutes”, where he gets into the fees and pseudo-scams, here.

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